How can I create a smooth looping animation for cloth simulation?
My first choice would be to run the simulation for the entire animation, but the idea of using the MDD exporter could be applied a bit differently than the example you gave.

Export the cloth simulation to an mdd file.

Remove the cloth simulation from the object and add a Mesh Cache modifier. Set the File path to the mdd file you saved previously.



This will play the cloth simulation using the exported data. By using keyframes on the modifier values we can make it repeat the same simulation data. By using two mesh cache modifiers we can have a chance to smoothly transition between repeats.

Lets say we have a cloth simulation of 100 frames.

We have modifier1 with a frame start of 1 and then keyframe the influence to go from 1.0 on frame 95 to 0.0 at frame 100.

Then we have modifier2 with a frame start of 95 and influence keyframed to go from 0.0 on frame 95 to 1.0 on frame 100.

This should give us a smooth transition between the last and first simulation frames.

By keyframing the start frame we can re-use the two modifiers to repeat the simulation over and over again.